Excellence in financial
communication
Meeting the needs of international investors
by ensuring effective financial communication
Meeting investors’
demands
Are you ready ...
Financial communication
Effective financial communication of a company’s performance
can affect its share price performance and cost of capital.
The effectiveness of corporate management is commonly assessed by how a
company’s share price performs. However, if share prices do not perform in line
with performance and peer companies’ share prices, management should review
its financial communications effectiveness and strategy.
Financial communication (often managed by an investor relations (IR) function)
is an important link between the company and its investors, especially in
challenging global capital markets. So it is no surprise that the top 10 priorities
of management and boards include opportunities for effective financial
communication with investors.
Communication matters: the management and board require an
effective financial communications strategy for a challenging
21st century
2
Public spotlight
Constant change
Corporate performance and behavior
has been in the public spotlight and
is regularly highlighted in the media,
featured on dedicated round-theclock news channels as well as in
real-time online portals and social
networks.
Capital markets have undergone
major infrastructural changes in the
past decade. In terms of regulations
and corporate governance, good
financial communication must provide
a greater volume of intelligence and it
must adapt to these changes.
Globalization
Real-time environment
Particularly through interlinked
capital markets, the IR function
has to meet global best practices.
Active investors have an increasing
influence and demand for additional
information.
Today’s share trading is dominated
by many high-speed global networks.
The stock market remains a fastmoving environment with a greater
demand for faster IR response to
investors’ requests.
| Excellence in financial communication
starts in the
boardroom
Excellence in financial communication depends
on the external and internal effectiveness of the
IR function.
Internal and
external
effectiveness
of the IR function
is key to excellence
in financial
communication.
Internal effectiveness
Effective communication also relies on clear processes and
structures governing which information will be provided
and how individual units are acting together through to final
disclosure.
External effectiveness
Keeping existing shareholders satisfied with the right
information, on a timely basis, and attracting new investors,
in order to ensure that a company’s share price is fairly
valued, while simultaneously maintaining regulatory
compliance in the capital markets, are key goals of the
IR function.
Achieving and improving effectiveness in the investor relations function |
3
Internal
effectiveness
… to deliver effective financial communication?
Seven effectiveness
Which factors determine the effectiveness of the financial
communications of listed companies or entrepreneurs preparing
to raise capital?
1
Compliance with all
regulatory requirements
2
Good corporate
governance
Are there clear internal processes and communication, and reporting lines
and responsibilities, in place to ensure regulatory compliance to help maintain
investors’ confidence?
Can the best practices of your peer group be matched in delivering financial
communication in response to day-to-day investor requests? Are the structures
and organization appropriate?
Board
Regulatory
compliance
4
| Excellence in financial communication
Good
corporate
governance
Providing
transparency
Compelling
equity
story
CEOs and CFOs
around the globe
bear responsibility
for the effectiveness of their
companies’ IR
function, both
internally and
externally.
factors of the
IR function
3
Providing
transparency
Are all internal departments aware of
disclosure obligations and periods, as well
as regulatory changes, at all times? Are
they supported by the IR calendar? Who
monitors the IR function?
Delivering
on promises
Facilitating
share
liquidity
Investor
communication
But how can
this be achieved
or improved?
Relative
share
price
Achieving and improving effectiveness in the investor relations function |
5
External
effectiveness
6
4
Compelling
equity story
5
Delivering
on promises
Is the equity story both attractive and up to date, reflecting the
key performance indicators, segment reporting and business strategy?
Are you meeting the expectations regarding your forecasts based on
relevant analyst guidance?
| Excellence in financial communication
6
Facilitate
share liquidity
7
Investor
communication
What is the best method for keeping pace in the competition
for capital and maintaining share liquidity as a listed company,
especially if internal awareness and external attention has
waned?
Does the capital market communication follow international
standards, and does it have a presence in all relevant media
channels?
Achieving and improving effectiveness in the investor relations function |
7
Risks and
opportunities
Communication matters
Why assess financial
communication?
Testing the IR function to mitigate risks
The first external indications that action is needed to examine the IR function
and financial communication include falling share prices compared with your
peer group, despite good financial results or latent low liquidity in the share or
high volatility. Internally there could be uncertainty regarding the reliability or
transparency of internal processes and a lack of clearly defined responsibilities;
repeated failure to meet budget figures; and a rise in the number of queries from
the board of directors regarding aspects of the strategy.
Perceived risks
Potential opportunities
• Decreasing share liquidity
• Improve share liquidity on
exchange
• Declining share price relative
to peers
• No index visibility
• Less or no analyst coverage
• Weak investor awareness
• Weak internal alignment to
investors’ expectations
• Uncertainty about disclosure
processes
• Lack of transparency in the
internal organization and
governance
• Cost pressure on IR budget
8
| Excellence in financial communication
• Improve the position in the peer
group to attain a better valuation
• Raise investor awareness
• Improve index participation
or ranking
• Align organization to investors’
expectations
• Optimize internal processes to
fulfill regulatory and disclosure
requirements
• Improve transparency for the board
and align communication activities
• Optimize effectiveness of IR
Improving the IR function to realize opportunities
We deliver an
assessment of
the effectiveness
of the IR function
based on a
predefined scope.
Alternatively, you may see opportunities for enhancing and
improving financial communications. In the case of index
candidates, this can mean improving the ranking in the index.
You may also seek to more closely align the organization,
processes and infrastructures with the growing importance of
the IR function, especially in challenging global capital markets,
to improve their effectiveness in the future.
Achieving and improving effectiveness in the investor relations function |
9
Excellence in financial
communication
Getting ready with EY
10
Why work with
a market leader?
EY is a market leader in advising on IPOs. EY has over 30 years of experience
in advising organizations on the internal preparations and processes needed to
raise capital from the global markets. Our integrated services provide our clients
a full service package prior to, during and after raising capital. EY professionals
experienced in capital markets will cater to your financial communication needs
worldwide in line with your financing strategy, in the capital market of your choice
and in the form of finance you prefer.
EY provides wide-ranging support to your financial
communication organization
•Implementation of financial
communication in your organization
• International benchmarking,
analysis and identification of
potential for improvement
| Excellence in financial communication
• Reviewing the effectiveness of
your financial communication
• Realizing the identified potential
for improvement
• Putting IFRS in financial
communication into practice
Your contacts for IPO and
listing services in Germany,
Switzerland and Austria
EY can support your financial
communications
Dr. Martin Steinbach
Executive Director
Head of IPO and Listing Services
Financial Accounting Advisory
Services
IPO Leader Germany,
Switzerland, Austria and EMEIA
Regardless of whether you want to source
debt capital or equity from private or
public capital markets, investors’ demands
on your financial communication are
becoming increasingly similar. We look
forward to discussing these issues with
you in person.
Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft
Mergenthalerallee 3–5
65760 Eschborn, Germany
Office: + 49 6196 996 11574
Mobile:+ 49 160 939 11574
[email protected]
Your EY team
Michael Oppermann
Partner
Wirtschaftsprüfer
(German Public Auditor)
Steuerberater (Tax Advisor)
Regional Leader Financial
Accounting Advisory Services
Eschborn/Frankfurt
Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft
Mergenthalerallee 3–5
65760 Eschborn, Germany
Office: + 49 6196 996 27305
Mobile:+ 49 160 939 27305
[email protected]
Achieving and improving effectiveness in the investor relations function | 11
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